IBM plan to open software patents seeds IP debate

San Jose, Calif.  A move by IBM Corp. last week toward a "patent commons" for software has rekindled a long-simmering debate about how best to manage intellectual property within the electronics industry. While IBM has come down on the side of patent pools, others think indemnification plans, prior-art repositories or even legislation are a better bet. So far, no route cleanly does it all.

Big Blue's announcement that it would make 500 of its patents available royalty-free for open-source software developers was seen as a way of defending its server business, which increasingly depends on the open-source Linux operating system. That business is under threat from the SCO Group and Microsoft Corp., both of which contend that open-source developers and end users may be infringing on their intellectual property (IP).

The news sparked hopes among some industry watchers that companies could collectively find a saner way of handling IP rights.

"People will see the benefits of agreeing to live in peace, so they don't have a situation where the winner is the one who can best take advantage of the patent system," said Daniel Ravicher, executive director of the Public Patent Foundation, a not-for-profit legal-services group. "People should compete by spending money on R&D, not on patent attorneys."

Moreover, the move represents a shot in the arm for the open-source movement itself, he said. "A lot of people who up until now were uncertain about the legitimacy of open-source software will see this as a badge of respectability," Ravicher said.

But other industry players were skeptical about the dream of creating an intellectual commons.

"You could do it with copyrighted material," said Phil Albert, a partner at Townsend & Townsend & Crew (San Francisco). "You just put the material in a pool, and anyone can take it out and use it, because the creator has the right to grant that right. But that doesn't work with patents."

Instead, "You can violate a patent unknowingly, by independently arriving at the same result that the patent holder claimed," he said. (Is the patent system broken? Ron Wilson examines the issue in Opinion, page 4.)

IBM's move comes at a time when anxiety among open-source developers and users is "pretty high," said Rich Belgard, a consultant on patent issues based in Saratoga, Calif. "Everyone is getting nervous," and lawyers are expressing concerns about the legal complexities of litigating open-source licenses where liability might extend to a host of seemingly unrelated products using the same code.

The anxiety is greatest among those that feel they are the biggest targets  large end-user and systems companies that use or ship Linux products in volume. SCO, which maintains a Web listing of court documents in its suit against IBM (see www.sco.com/ibmlawsuit), ranked as the most-searched business site on Google's news service last year.

Nevertheless, the industry's collective attention has shifted in the past year from SCO to Microsoft, said Jason B. Wacha, general counsel for MontaVista Software Inc. (Sunnyvale, Calif.), which sells a version of Linux used in consumer electronics devices such as Motorola cell phones. That's because the five separate SCO lawsuits regarding Linux are increasingly seen as copyright and contract disputes, not directly tied to open-source patents.

"Even if SCO prevails, there is the sense this won't spill out into the open-source community," said Wacha.

"I ignore [the SCO suits]," concurred Ravicher of the Public Patent Foundation. "It's very exciting drama, but it has no more legal significance than The Young and the Restless."

Microsoft is another story. In June 2003, the Redmond, Wash., software giant hired as its head of IP affairs Marshall Phelps, a 28-year IBM veteran who is seen as the architect of an IP business that raked in $2.7 billion in 2000 licensing IBM's then 33,000 patents. (The number has since climbed to 40,000.)

Sources said Microsoft has told Linux companies in private discussions that they are violating its IP. Microsoft declined to be interviewed for this report.

Legally, SCO's copyrights and Microsoft's patents are two very different beasts, said Albert, the San Francisco attorney. "There is no innocent infringement of copyrights," he said. "You violate a copyright by knowingly copying protected material. If you arrive at the same result independently, that is not infringement. Patents work very differently."

Access to the IBM patents could provide ammo in defense of anyone served with a lawsuit, said MontaVista's Wacha. "This is further evidence that one of the big players is on the side of the open-source industry, and I think it does open up extra legal avenues as well," he said. "It's one more hurdle to clear for someone claiming infringement."

Still, Ravicher cautioned, "it's not the end of all open-source patent risk."

Indeed,"I don't know if this will have any effect at all," said consultant Belgard. "All it takes is one patent that's infringed to put you out of business."

Both IBM and the Public Patent Foundation take the position that a patent commons is the best way forward. "This is the long-term solution for the patent problem," said Ravicher, who is discussing efforts with a wide variety of companies and academic groups. Unlike IBM, which aims to be as inclusive as possible, Ravicher prefers a model that provides patent rights only to participants that also contribute their own IP to the pool. This is the approach that currently serves numerous hardware-based standards efforts and patent pools.

"That's a defensive commons that says 'in this area, we will not assert patents,' " Ravicher said. Ultimately these islands of agreement could band together, he said.

But a patent pool by itself might not offer full protection. "It's not even clear what it would mean to put the functionality of a method or an apparatus in a pool," said attorney Albert. "But even if you could, the party that put it in would have no power to defend users against the claims of other patent holders."

Some note that the complex web of IP cross-licenses in today's industry makes it difficult for a company to cleanly put any of its patents in a common zone. Others point to the MPEG Licensing Authority as an example of a successful patent pool.

Martin Fink, vice president of Linux at Hewlett-Packard Co., thinks Microsoft and its patents do not present "a material threat to the open-source market. We're still perplexed about why IBM is not responding to the No. 1 and only threat to Linux, which is SCO," he said.

In addition, Fink sees IBM's logic as faulty, because OEMs cannot assert royalties on any patents for products shipped under most open-source licenses. Thus, IBM's offer of royalty-free patents is redundant, Fink said.

What IBM should do is offer to indemnify customers against any SCO lawsuits, as HP has done, he said. For its part, HP has no plans to throw its considerable patents for the HP-UX Unix operating system into an open-source patent commons.

"When IBM responds to our call for [customer] indemnification, we will respond to their call about patents," Fink said.

HP claims it is the market leader in server revenue for shipments of Linux, Windows and Unix. Fink denied that the decision to withhold software patents was motivated by a desire not to hurt its relationship with Microsoft.

The Open Software Risk Management group is also taking the indemnification approach. The group has identified some 283 patents that it thinks could harm Linux, and is setting up a business model to collect fees in exchange for defense, said Albert.

Last January the Open Source Development Labs Inc. (OSDL) set up a $10 million legal fund for open-source developers with contributions from IBM, Intel and MontaVista. So far several OSDL members subpoenaed in the SCO lawsuits and one outside group have tapped into the fund, said Bill Weinberg, a chief marketer for the group.

Beyond indemnification, another approach "would require an organized effort [by the community] to identify prior art and to invalidate any patent that was asserted against an open-source developer or user," Albert said. Not only would this strategy blunt an attack  assuming the claims of prior art were judged valid  but it would quickly discourage any further attacks against the community.

OSDL has been asked to create a repository of prior art on open-source software for that purpose. The notion may be unworkable, however, since a single patent search for prior art can cost as much as $1 million.

"It's an expensive idea. We do not have a good measuring stick for what would go into the repository," said OSDL's Weinberg.

Ultimately, others in the industry look to Washington for a solution. "What we hope happens is that Congress reforms the Patent Act in this session," said Mark Webbink, deputy general counsel for Red Hat Inc. (Raleigh, N.C.). Rep. Rick Boucher (D.-Va.) submitted such legislation in the last session and is expected to refile it this year, he said.

Proposed reforms include tightening up on software patents, including returning to an old and higher definition for what is a nonobvious method. In addition, the process of issuing and reexamining a patent should be opened up to allow third-party comment in a relatively low-cost administrative procedure, Webbink said. "There's nothing so expensive as patent litigation."

Questions remain about the real value of IBM's 500 patents, which the company pegged at $10 million. Ravicher said it can take 30 hours just to determine the value of a single patent.

"IBM lets a couple of thousand patents expire every year because they don't want to continue to pay the maintenance fees on them," said a source who asked not to be named. "This is a way to get some PR mileage for that."

Typically, according to Ravicher and others, only 1 percent of all patents ever become the subject of litigation, and only half of those stand up in court.

"Early on, people said IBM was just dropping some junk, but they were much too quick to dismiss these patents," countered Weinberg of OSDL, which specifies three variants of Linux for business users. "These are not small patents at all. They have everything to do with the core business of building an operating system."

Weinberg said three of the 500 patents (US5185861, US5247681 and US5617568) are significant. They cover cache balancing and allocation in a multiprocessor server, dynamic linking of software modules and exporting file attributes. The last of the three, especially, is key for sharing files and printers between Linux hosts and Windows clients in business networks, he said.